The Answer to the Problems of Adverse Selection and Moral

question 62

Multiple Choice

The answer to the problems of adverse selection and moral hazard are found partly in the fact that

• A)elections work through competition, which motivates rational candidates to formulate policies that will please voters.
• B)elections do not require candidates to reveal much information about themselves.
• C)electoral laws are fungible and change frequently, leaving candidates largely unregulated.
• D)history matters, so candidates who have won elections before will win again.
• E)when many peoples' preferences are assembled together, these small problems usually vanish due to the large numbers of voters.

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Definitions:

Itemize

This refers to the process of individually listing tax deductions on one's tax return, rather than taking the standard deduction.

Investment Interest Expense

The amount of interest paid on debt incurred for investments, allowing taxpayers to deduct it under certain conditions.

Gross Investment Income

The total income generated from various investment sources before any deductions or taxes are applied.

Medical Expense Deduction

A tax deduction allowed for unreimbursed medical expenses that exceed a certain percentage of the taxpayer's adjusted gross income.